Answer

Assessment 2: Cost and Quality Management Plans

Executive summary

            Project quality and cost management is very important in ensuring the Vehicle Maintenance Services facility is implemented within cost, time, scope and quality specifications.  Project quality management ensures the stakeholders expectations are met. In estimating project costs, it is important that the project risks are taken into account. This ensures project costs are as accurate as possible. A risk assessment and mitigation template is the most ideal template in this process. The project manager should use a project budget control tool to monitor project expenditure and report variances to management. The project manager should estimate quality management costs such as conformance and non-conformance costs to ensure quality specifications are met.

Table of Contents

Executive summary. 2

Introduction. 2

PART A: Definition of Project Quality and its Association to Project Cost Management 3

Part B: Cost and Quality Management Plans. 6

Project cost estimate and a project budget baseline. 6

Cost Management plan. 9

Quality Management Plan. 13

References. 17

The report evaluates and applies a wide range of project quality and cost management tools, techniques and practices to address the needs of the Vehicle Maintenance Services facility project.  The report highlights and pays attention to issues that might impact on the desired outcomes of the project. The report identifies and expounds on budgetary and planning outcomes to diverse stakeholders. The report identifies quality management tools that will be used to achieve the outcomes that are desired by project stakeholders.  Cost estimates have been identified as the starting point in project cost management process.  Quality management in the vehicle maintenance services facility project includes activities and processes that determine quality policies, quality objectives and responsibilities that ensure stakeholder needs are met.

PART A: Definition of Project Quality and its Association to Project Cost Management

            Project quality refers to the extent to which a project meets the requirements of the project from the point of view of project customers and key stakeholders. From a customer’s point of view, quality management are the policies and procedures prepared to ensure the project meets its intended needs and requirements. Quality involves creating a product or delivering a service that meet stakeholders and/or customers’ needs by ensuring that it is fit for the intended purpose.  Quality management ensures the quality of the project deliverable is achieved by putting in place the appropriate processes and activities (Xie, 2016). Understanding what stakeholders or customers require from project deliverables is simply what quality in a project is all about.  Project quality management involves delivering a product or a service that meet the specifications of stakeholders or customers of a project and it’s the responsibility of the project manager to ensure that does happen (Baker, 2018). Quality is achieved through planning, designing and building it into a product or process during planning stage. It is up to the project management team to ensure the project meets the expectations of both stakeholders and the customer. Meeting quality is, therefore, ensuring that a project achieves the expectations of its stakeholders and customers. The degree to which requirements of a project are fulfilled by characteristics inherent in the project sums up what quality is all about (Xie, 2016).

            Quality management tools and techniques broadly encompass planning quality management, performing quality assurance and quality control. Quality management involves identifying requirements for the quality of the deliverables to be achieved and how the project should be managed to ensure this is realized. The project manager should document the expected quality and determine how it will be realized. A quality checklist should be instituted to ensure quality marks are tracked in the project. Regular meetings and email communication among project staff and stakeholders should also be instituted to ensure quality is achieved (Baker,2018). A good quality management system must encompass a quality assurance process. Planned and systemic activities implemented to ensure quality requirements in project deliverables are achieved in a quality system is what quality assurance is all about. The processes and procedures instituted in a project should ensure deliverables meet quality requirements of a project. The project manager should undertake a project audit to ensure this is realized. Moreover, a process checklist should also be prepared to ensure project deliverables meet project quality specifications (Durdyev,  Omarov, Ismail & Lim, 2017).

            Quality control includes such processes as testing and peer reviews. These processes test the quality of the deliverables to ensure they meet the set quality standards. Adjustments could be instituted if variations are detected.  It has been argued that quality is not cheap as the money spent on dealing with issues during project implementation is the cost of quality.  Poor quality management can thus be costly to the project (Ceptureanu, Ceptureanu, Luchian & Luchian, 2017). Any funds used to handle project failures are also the cost of quality, otherwise known as cost of conformance or nonconformance to quality requirements in a project. The cost of conformance includes all preventive costs relating to training, documentation and acquisition of equipment required and time to ensure quality is achieved.  Destructive testing, loss and inspections and testing are some of the conformance costs that must be incurred to ensure the project meets quality standards (Xie, 2016). 

            In the case of the Vehicle Maintenance Services project, poor quality can create conformance costs, which could impact on the cost of the project by causing cost overruns. Such costs include training costs, documentation processes, equipment costs and inspection testing. These are costs that could be incurred to ensure the project achieves the set quality standards (Ceptureanu et al, 2017). If the project does not meet quality standards, then conformance costs will be incurred. Nonconformance costs involves the costs incurred due to internal failures such as costs of having to rework a task or remove it from the project. Lost business opportunities and warranty work are some of the nonconformance costs. These costs increase the cost of implementing the project (Ceptureanu et al, 2017).

            Continuous improvement is critical in ensuring quality standards are met in the project.  The project manager must ensure there is a mechanism of monitoring quality constantly and documenting any issues that arise. This ensures that there are incremental changes whether in small bits or in a large scale to improve project deliverables to ensure they meet customer and stakeholder expectations (Chen, Lan, Zhao & Shang, 2019).

Part B: Cost and Quality Management Plans

Project cost estimate and a project budget baseline

The Vehicle maintenance facility project estimated project cost is shown in the table 1 below.

Table 1: Project Cost Estimate

            As shown in table 1 above, the seven main activities include project management, initial site work, foundation, structure and envelope, interiors-office area, final site work and project close out. The total project cost is approximately $655,619.00. Each of the main activity has sub- activities which are allocated specific costs. The cumulative total of all costs of the activities make the total cost for each main activity (Ljevo, Vukomanović & Džebo, 2018).

             A project budget will be developed from a cost estimation template. Each budget will have a column for each financial year, the amount budgeted to be spent and actual total amount spent. This will enable the project manager to assess whether the project is within budget or not and use the information to make adjustments and inform stakeholders (Reid, 2016). Here below is a project budget base line for the Vehicle Maintenance Services facility project. The project budget will track the costs for implementing each activity. If there are cost overruns the project manager will be able to track it and take corrective measures on time. The project budget timeline will also form the basis of project cost control (Reid, 2016).

            In arriving at the above cost estimates the project manager should identify various risks which could impact on the accuracy of the costs. These risks include inflation risk, credit risk and availability risk among others. To arrive at cost estimates which are reliable and accurate, the project manager obtains quotations from suppliers of the various cost items and professional architects and quantity surveyors who will be contracted to implement the project. This ensures the cost estimates are accurate and reliable (Reid, 2016).

Table 2: The project budget control tool

            The project cost management tool, above classifies costs into three categories i.e. labour costs, material /input/ capital items costs and fixed costs.  Labour costs are costs incurred on project implementation staff while material/ inputs/ capital item costs are costs incurred to purchase various capital items and construct the vehicle maintenance services facility such as initial site works, foundation etc(Reid, 2016). Fixed costs are costs which must be incurred irrespective of whether the project is under implementation or not such as electricity and water.  Actual amount spent and under / over budget columns are normally filled during implementation and will be used to track whether the project is implemented according to budget or not (Reid, 2016).

Cost Management plan

            A cost management plan is simply the techniques to be used to plan, estimate project costs, prepare cost baseline or a budget and execute the budget of the vehicle maintenance facility project to ensure it is implemented within the budgeted estimates and on time. Without a proper cost management plan, it is difficult to complete the project as per the budget and on time, thus it becomes very costly to the organization. Cost is one of the factors that will determine whether the project will succeed or fail. As such, a cost management plan is very crucial if the Vehicle Maintenance Services facility is to be implemented successfully (Reid, 2016).

            Resource planning, cost estimation, budgeting and cost control are the primary processes of a good cost management plan to ensure the project achieves its deliverables. A work breakdown structure is very important in resource planning. It is perhaps the most important tool in resources planning for the vehicle maintenance services facility (Reid, 2016). The project work breakdown structure assists the manager to understand which activities consume most of the project’s resources and which will consume the least. According to the work breakdown structure of the vehicle maintenance facility, foundation, structure and interiors will consume the bulk of the estimated budget of the project (Steinman, 2017).

            The next component of the cost management plan is a detailed cost estimation of the project. Cost estimation is a process that keeps on changing. Conceptual goals, historical knowledge, expert judgment and determinative techniques are some of the factors that influence cost estimation techniques (Steinman,2017). Determinative techniques are the most ideal as they are the most widely used. To enable accurate cost estimation every project detail including scope and deliverables needs to be mapped out. For a reliable cost estimation, the work breakdown structure needs to be developed (Steinman,2017). For the vehicle maintenance facility, a work breakdown structure that lays out work, tasks and activities to be done was prepared as shown below.   The work breakdown structure lays out all the deliverables, tasks and activities that must be undertaken to implement the project successfully. The cost estimates of these activities was determined in Table 1 above.  The project work break-down structure is as shown below;

Figure 1: The Vehicle Maintenance Services facility Project Work break down structure

One of the methods that costs can be determined is through a cost baseline. A cost baseline uses the general time period to estimate costs of a project and is often used to compare the performance of the project. It determines the cost threshold; that is, the highest and the lowest spend.            The level of precision in cost estimation is determined by the scope and size of the project (Steinman, 2017). The project manager will use the earned value measurement to determine as accurately as possible the amount of work to be performed.  He/she could also use the three-point estimation technique to determine the cost of the project.  Using a formula in this technique, the project manager can determine the best guess estimate, the pessimistic estimate and the optimistic estimate of the cost of the project. The optimistic estimate is what the cost would be if all positive risks actualized, while the pessimistic estimate is what the cost would be if all negative risks were realized (Oigo, 2019).

            Bottom-up cost estimate is yet another method that is used to estimate the cost of a project. Smaller estimates of the project are developed, which are then aggregated to determine the sum total of the entire project. In the case of the vehicle services facility, by using the bottom-up estimate, every activity that is to be performed to realize the project deliverables was assigned a cost. The costs of all activities were aggregated to arrive at the total cost of the entire project the cost baseline. Analogous estimation is yet another technique that was used to estimate the cost of the project (Xie, 2016). By comparing all past projects cost estimates and measuring them against the present project’s time and cost the project cost can be arrived at.  Lastly, parametric estimation was also used to determine the cost of undertaking the vehicle maintenance facility. Each task was tied to a cost and each cost was mapped against the project’s time line to estimate the cost of the entire project. By using a Gantt chart, attached herewith, each task was allocated a cost which was then aggregated together to determine the total cost (Xie,2016).

Budgeting is the next component of the project cost management plan. The cost estimation exercise simply mapped out the budget blue print but was not a budget on itself. Without a proper precise project budget, the project cannot achieve its deliverables. Since budgets contain phases, the project manager will be able to determine whether the project is being implemented by comparing the budgeted expenditure against the actual expenditure at each project  implementation phase. This will enable the project manager to manage cost overruns which threaten to derail successful implementation of the project (Xie, 2016).

Cost control is the next component of cost management plan in a project. Project requirements which are determined at the planning stage are used as the basis for cost control which is used to control costs and prevent them from escalating out of control. Cost management plan assists the manager to not only plan for costs but also to manage costs throughout the life span of the project. To stay within budget all project expenses will have to be documented carefully (Xie, 2016).

Quality Management Plan

            Planning quality management, performing quality assurance and quality control are the main processes involved in quality management planning.  The project manager will identify requirements and standards that enable the project to meet quality in the vehicle maintenance services facility.  He/she will also establish quality audit checklists which will need to be completed to measure whether quality standards are being met.  Monitoring for quality will also be undertaken to ensure quality is achieved.  The project manager will use various tools and techniques to manage quality. The first activity is identifying the cost of quality (Xie, 2016).  These are the costs of conformance and nonconformance to quality standards and requirements. The cost of conformance is cheaper than the cost of nonconformance as prevention of mistakes is cheaper than the cost of correcting them. Some of the prevention costs include training, reliability engineering and test engineering among others.  These costs are built in the project cost estimates. Other costs include appraisal costs, which are basically costs to ensure the project offers the services it was meant to offer. For example, in the Vehicle Maintenance Services project conformance costs will include costs of training staff, costs of reliability engineering and test engineering (Oigo,2019). 

            The project will also adjust for nonconformance costs. These are the costs for not complying with quality standards and requirements, and they include direct failure costs such as rework costs, engineering changes and warranty costs among others. The project manager must also factor in indirect costs such as poor staff morale and low revenues among other costs. These costs are usually estimated during risk assessment and analysis and mitigating factors identified to make sure the project meets quality standards and requirements (Oigo, K. (2019). A project risk management template is shown below.

The risk assessment and management template above assist in identifying project risks, likelihood of occurrence, likely impact and mitigation strategies for each risk identified. Risks with high likelihood of occurrence and with highest impact are prioritized as they are the most disastrous. These are also risks that have a direct impact on the cost estimate of the project. The template is used during project cost estimation and can also be used in managing project quality (Oigo,2019).

            Apart from identifying the cost of quality, another technique used to plan for quality include brainstorming where unfiltered ideas are obtained to manage quality. Factors that are for or against the project are grouped in a technique called field force analysis to manage quality in a project. This technique will also be used to manage quality in the case study project (Xie, 2016).

            Quality control focuses on the results of a project to measure quality performance and recommend changes to be made to achieve project quality.  Quality in the vehicle maintenance facility will focus on project schedule to measure whether activities are implemented within time and quality standards.  Any deviations will be noted and corrective measures taken.  The project manager will create a quality management team to check whether quality standards are being implemented on time (Xie, 2016).

            The project manager will rely on Ishikawa’s tools of quality to manage the quality of the vehicle maintenance facility, which include a cause-and-effect diagram, a flowchart, a check sheet, a Pareto diagram, a control chart, a histogram and a scatter diagram. The cause-and–effect diagram, otherwise known as fishbone diagram, will allow the project manager to establish how various factors contribute to quality and any problems are solved early. Flow charts will also be used to manage and control quality in the project (Xie, 2016). The flow charts will enable the manager to identify how activities in the project relate to the deliverables. Additionally, they will enable the project manager to identify potential problems affecting quality which will enable changes to be made to correct them early in advance.  Documenting the processes that will be undertaken will enable the project management team to identify quality problems early enough (Xie, 2016).

            The project manager will also use check sheets to manage and control quality in the vehicle maintenance project. This way, the project manager will be able to organize the information in a particular order to enable him gather the information required for quality management and control.  The check sheets will specifically be useful for carrying out inspections on various quality milestones. For example, when carrying out quality checks on the foundation, check sheets will be used to check whether various activities were performed on time, whether the correct materials were used and whether testing was carried out to check the soundness, and whether technical quality standards were achieved (Xie, 2016).

            A Pareto diagram will also be used to manage quality in the case study project.  The Pareto principle holds that 80% of the quality problems will emanate from 20% of the activities performed.  The Pareto diagram that will be developed will enable the project team to focus on 20% of the critical areas which can lead to major quality issues. The project manager will also use a control chart and a scatter diagram to manage and control quality in the project (Durdyev, Omarov, Ismail & Lim, 2017).